FPIs withdraw ₹64,150cr from Indian equities this January
What's the story
Foreign Portfolio Investors (FPIs) have pulled out a whopping ₹64,156 crore from Indian equities this month. The trend is largely due to the falling Indian Rupee and rising US bond yields. The anticipation of a dull earning season has also led to this exodus. The data shows that this withdrawal comes after an investment of ₹15,446 crore in December 2024.
Market pressures
Factors influencing FPIs' withdrawal
Himanshu Srivastava, the Associate Director - Manager Research at Morningstar Investment Advisers India, explained that the continuous depreciation of the INR is putting significant pressure on foreign investors. This is leading them to withdraw their money from the Indian equity markets. Despite recent corrections, higher valuations of Indian equities and macroeconomic headwinds are making investors cautious.
Investment trends
US policies impact investor behavior
Srivastava further added that the unpredictability of Donald Trump's policies has made investors cautious and steer clear of riskier investment avenues. Data shows FPIs have been sellers on all days this month, except January 2.
Market impact
Sector-wise impact and debt market withdrawals
The financial sector has taken the biggest hit from FPI selling as a large part of their assets under management (AUM) is in the sector. Meanwhile, the IT sector witnessed some buying on the back of better prospects and positive management commentary. FPIs have also been sellers in the debt market, pulling out ₹4,399 crore from the debt general limit and ₹5,124 crore through the debt voluntary retention route.
Investment shift
Investment trend in Indian equities
Overall, the trend shows a cautious stance by foreign investors, who sharply curtailed their investments in Indian equities last year, with net inflows of just ₹427 crore. This is a stark contrast to the ₹1.71 lakh crore net inflows in 2023, fueled by optimism over the country's strong economic fundamentals. The year 2022 witnessed a net outflow of ₹1.21 lakh crore amid aggressive rate hikes by global central banks.